Correlation Between BANK CIMB and Japan Asia

Can any of the company-specific risk be diversified away by investing in both BANK CIMB and Japan Asia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BANK CIMB and Japan Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BANK CIMB NIAGA and Japan Asia Investment, you can compare the effects of market volatilities on BANK CIMB and Japan Asia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BANK CIMB with a short position of Japan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK CIMB and Japan Asia.

Diversification Opportunities for BANK CIMB and Japan Asia

-0.54

Correlation Coefficient

BANK CIMB  Japan Asia

Excellent diversification

The 3 months correlation between BANK and Japan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding BANK CIMB NIAGA and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment and BANK CIMB is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BANK CIMB NIAGA are associated (or correlated) with Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of BANK CIMB i.e., BANK CIMB and Japan Asia go up and down completely randomly.

Pair Corralation between BANK CIMB and Japan Asia

Assuming the 90 days trading horizon BANK CIMB NIAGA is expected to under-perform the Japan Asia. But the stock apears to be less risky and, when comparing its historical volatility, BANK CIMB NIAGA is 1.68 times less risky than Japan Asia. The stock trades about -0.13 of its potential returns per unit of risk. The Japan Asia Investment is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Japan Asia Investment on December 11, 2024 and sell it today you would earn a total of  24.00  from holding Japan Asia Investment or generate 19.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

BANK CIMB NIAGA  vs.  Japan Asia Investment

BANK CIMB NIAGA

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK CIMB NIAGA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Japan Asia Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK CIMB and Japan Asia

The main advantage of trading using opposite BANK CIMB and Japan Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK CIMB position performs unexpectedly, Japan Asia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Japan Asia will offset losses from the drop in Japan Asia's long position.

The idea behind BANK CIMB NIAGA and Japan Asia Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.